Short-Run Aggregate Supply (SRAS)
Introduced| English | Meaning |
|---|---|
| aggregate supply/ˈæɡrɪɡeɪt səˈplaɪ/ | The total output firms are willing and able to produce at different general price levels over a specified period. |
| short-run aggregate supply/ʃɔːt rʌn ˈæɡrɪɡeɪt səˈplaɪ/ | The relationship between the overall price level and total output firms supply while some input prices remain fixed. |
| sticky/ˈstɪki/ | Describing a price or wage that adjusts slowly when economic conditions change. |
| nominal wages/ˈnɒmɪnl ˈweɪdʒɪz/ | Wages expressed in current money values without adjusting for changes in purchasing power. |
| input prices/ˈɪnpʊt ˈpraɪsɪz/ | The prices paid for resources used in production, such as labour, energy and raw materials. |
| productivity/ˌprɒdəkˈtɪvɪti/ | Output produced per unit of input over a given period. |
| supply shocks/səˈplaɪ ʃɒks/ | Unexpected changes in production conditions or costs that shift aggregate supply. |
| inflationary expectations/ɪnˈfleɪʃənəri ekspɪkˈteɪʃnz/ | Beliefs about how much the general price level will rise in the future. |
| negative supply shock/ˈneɡətɪv səˈplaɪ ʃɒk/ | An adverse change in production conditions that reduces short-run aggregate supply, tending to lower real output and raise the price level. |
What firms will produce — for now
- Aggregate demand is only half the picture; supply is the other half.
- Aggregate supply 总供给 is how much output firms will make at each price level.
- In the short run, it slopes upward — a higher price level brings more output.
- This is the short-run aggregate supply 短期总供给 (SRAS) curve.
Why SRAS slopes up: sticky wages
- In the short run, some costs are sticky 粘性 — fixed by contracts and slow to change.
- The clearest is nominal wages 名义工资, the dollar wages set in labour contracts.
- When the price level rises but wages stay locked in, profit per unit rises — so firms produce more.
- A higher price level therefore brings more output: an upward slope.
The AD-AS model
SRAS slopes up because wages are sticky in the short run. Dearer inputs shift it left (raising prices, cutting output); better productivity shifts it right.
SRAS slopes upward mainly because, in the short run:
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With wages locked in, a higher price level means more profit per unit, so firms produce more.
Costs that are fixed by contracts and slow to change in the short run are called ______.
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Sticky nominal wages are the key reason SRAS slopes upward.
What shifts SRAS
- Input prices 投入品价格 (wages, energy, raw materials): higher input prices shift SRAS left.
- Productivity 生产率: higher output per worker shifts SRAS right.
- Supply shocks 供给冲击 and inflationary expectations 通货膨胀预期 shift it too.
A rise in input prices (like energy) shifts SRAS:
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Dearer inputs make production costlier at every price level, shifting SRAS left.
Select all that shift SRAS to the right.
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Cheaper inputs, higher productivity and positive shocks raise SRAS; dearer oil shifts it left.
Higher productivity lowers the cost of each unit and shifts SRAS right.
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More output per worker means cheaper production, so firms supply more at every price level.
A supply shock
- Worked idea. World oil prices double. Oil is an input for transport, plastics, and power, so costs rise across the whole economy — a negative supply shock 负面供给冲击.
- SRAS shifts left: less output is supplied at every price level.
- The price level rises and output falls at the same time.
- A positive shock (cheaper inputs) does the reverse, shifting SRAS right.
A negative supply shock (say, oil prices double) causes:
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SRAS shifts left, so along AD the price level rises while output falls — a preview of stagflation.
SRAS slopes up because nominal wages are sticky — a higher price level lifts profit per unit, so firms produce more. It shifts with input prices, productivity, and supply shocks: a negative shock (dearer inputs) shifts SRAS left, raising prices while cutting output.
Write from output falling to 840
- Oil prices jump. Short-run output falls from 900 to 840 while the price level rises.
- Name the shift.
A jump in oil prices cuts short-run output from 900 to 840 and raises the price level. Which curve shifted, and which way?
900 minus 840 is 60 less output when costs jump.
What does the oil jump do?
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Higher input costs shift short-run supply left.